On Content, Promotions, Basic Economics... And Loutish Statements

from the content-and-advertising dept

Last week, I wrote a post that kicked off an interesting discussion on the fact that all advertising is content... and that all content is advertising. The discussion only convinced me I hadn't clearly explained myself on the subject. I'm thinking of maybe doing another short series of posts to discuss this concept further. And, what better way to kick it off than to point out more faulty logic from Nick Carr. Just yesterday we had discussed how incorrect Carr was in his assessment of Billy Bragg's equally incorrect op-ed piece in the NY Times. Mike Arrington over at TechCrunch chimed in as well, making many of the same points that we make around here, and have made for years. Oddly, Nick Carr then responded to one particular sentence from Arrington, calling it: "the saddest, stupidest sentence I've ever read." Carr also called Arrington's explanation "loutish." What deserved such a claim?

"Recorded music is nothing but marketing material to drive awareness of an artist."

Now, I'm not going to speak for Arrington, but I will speak for myself, and note that I've been saying similar things for nearly a decade. So I'll defend my own statements and explain exactly how it fits into the point last week about all content being advertising -- and all advertising being content. First off, I don't think that recorded music only drives awareness of the artist. I think it helps drive awareness of a whole host of other scarce goods related to the artist. But awareness is the biggest and most important in implementing a useful business model. So I find it hard to see how it's either sad or stupid, considering that it's actually quite accurate and a fundamental understanding of economics would show how it's true. Besides, if that's really the saddest or stupidest (or both!) sentence Carr has ever read, he doesn't read much.

So why is Arrington right and Carr incorrect? Because Carr still doesn't seem to understand the difference between scarce and abundant (or infinite goods). He doesn't seem to understand externalities. And he doesn't seem to recognize basic econ 101 points, such as price being set at the intersection of supply and demand, or price being equal to marginal cost (two ways of saying the same thing). Finally, he doesn't understand that non-monetary value is equally as important as monetary exchange (and that non-monetary value can be turned into money). For someone who is apparently (is he really?) a well respected economic commentator, these are odd omissions to his education. With an infinite good, the price gets pushed to zero over time. Map out the supply and demand curves and you see that, and you can confirm it when you see that the marginal cost is zero. But this doesn't mean that all is lost. In fact, it's a benefit, because that infinite good now becomes a resource that makes any scarce good it touches much more valuable. In other words, it acts as "promotion" or "marketing material" or "advertising" for those scarce goods. But, you've heard this before.

This is also why all content is advertising. Content is an infinite good. All content advertises something and makes something scarce more valuable. Nick Carr's blog, for example, helps advertise him and convinces people to buy his book (a scarce good) or hire him for consulting (which is buying his time -- another scarce good). Billy Bragg's music acts as advertising for Billy Bragg. It helps him sell more concert tickets at a higher price, or better yet, embrace newer more interesting business models like Trent Reznor, Jill Sobule or Maria Schneider. All of whom are examples of using their content to sell something scarce. It's that content that makes the scarce item valuable, but the content itself, once it exists, is an infinite resource. Once you think of it that way, it's a promotional good that can be given to everyone for free, making every other scarce good you possess more valuable. It's hard to think of why you wouldn't want to promote that way.

And that leads us to Carr's mocking of Arrington with the following paragraph, showing how little he understands the difference between scarce and infinite goods:

"As a printed poem, one assumes, is nothing but marketing material to drive awareness of a poet. As a sculpture is nothing but marketing material to drive awareness of a sculptor. As a film is nothing but marketing material to drive awareness of a director."

As for the first example, yes, a poem is marketing material to drive awareness of a poet. And that allows the poet to sell many scarce goods, including books of poems, the ability to write a new poem, the ability to perform the poetry or even to get a job (say, as a poet laureate or a poetry teacher). None of those things are possible if the poems are not known. A sculpture is not an infinite good, so the statement doesn't quite fit. But an image of a past sculpture absolutely does help promote the sculptor and get them additional work in creating new sculptures (scarce goods!). As for the film, we've discussed this in great detail in the past. It is marketing material to drive people to buy scarce goods: seats in a theater. Even the great theater owner Marcus Loew recognized that: "We sell tickets to theaters, not movies." The movie is the content. It "advertises" the seats. It makes those scarce seats valuable. The content, you see, is advertising. That's not loutish, sad or stupid. It's just a basic economic truth.
Other posts in this series:

Reader Comments

The economics that Mike express in his various blog post are incredibly mundane.

His economic reasoning could probably be dumbed down to looking at what really scarce and what is not and charge for scarce, while using the non-scarce resource to make the scarce product/service even more scarce.

The problem with Mike's Theory

"And that allows the poet to sell many scarce goods, including books of poems, the ability to write a new poem, the ability to perform the poetry or even to get a job (say, as a poet laureate or a poetry teacher)."

Let's see, a poet works hard and becomes successful enough by selling books and ebooks to get rid of the "day job" and devote all of their time to being a poet. Now, under Mike's plan, they should give away the poetry for free so they can get a job as say a teacher? So they use their "infinite goods" to go back to the day job and spend less time being a poet, and producing less poetry. This is not the first time Mike's used such an example, which would ultimately hurt the consumer because it would drive down the production of such products (if the artist has to use their art for the opportunity to spend their time doing something else). And I don't think Mike knows how little poets make doing readings of their work - they usually don't make anything. But I know, Mike will say "that's now, but the market will change" and yet never admit that all his theory is is that, a theory.

Coherent and Relevant

One of the clearest, most articulate, and non-mundane posts yet. Excellent summary Mike, looking forward to additional posts.

I'm not sure if those that don't understand this theory (or economic truth) are (1) aged and set in past economic scenarios, (2) financially locked into an old economic model, or (3) just can't grasp the concept. Either scenario baffles me.

As you stated, economics are based upon supply and demand. Supply is becoming infinite on many goods that did not used to be infinite because of the internet. How can that not cause a major shift in how economics are viewed. Illegal or legal - who cares. What? You are going to put your trust in the individual to sustain old economic models?

Keep going Mike. Many of your readers will be ahead of the curve and will have many reasons to thank you (or support your economic needs by seeking additional advice).

Re: The problem with Mike's Theory

Now, under Mike's plan, they should give away the poetry for free so they can get a job as say a teacher?

That's not what I said.

I said that they had many other scarce goods to sell. One option would be being a poetry teacher. One option. I didn't say that's what they had to do.

This is not the first time Mike's used such an example, which would ultimately hurt the consumer because it would drive down the production of such products (if the artist has to use their art for the opportunity to spend their time doing something else).

No. Again, it's not about doing something else that would "hurt production." It's about doing something else that would AID production of that content.

And I don't think Mike knows how little poets make doing readings of their work - they usually don't make anything. But I know, Mike will say "that's now, but the market will change" and yet never admit that all his theory is is that, a theory.

Oh, I see. So you prefer the situation as it is now, where almost no poet can make a living at all? As opposed to an economic model that has plenty of evidence that it works outlining a model where people can make more money?

That makes no sense to me.

We're seeing this with music. More musicians are making more money today than ever before.

We're seeing this in fashion, which doesn't have copyright controls. The fashion industry is dynamic and large and profitable -- because of that lack of copyright.

Why would it suddenly not apply in poetry as well?

You say the burden is on me to prove my theory, but I'd argue it's the other way. I've shown the economic research. I've shown example after example after example. I've explained the basic economics as to why it works. And you come along (anonymously) and say "but it won't work." Who's more convincing at this point?

Re: Coherent and Relevant

I'm not sure if those that don't understand this theory (or economic truth) are (1) aged and set in past economic scenarios, (2) financially locked into an old economic model, or (3) just can't grasp the concept. Either scenario baffles me.

John, I've struggled with this as well. I'm now leaning towards the psychological explanation I discussed recently -- there's this sense that no one else can be better off. I think it's inherent in many people to believe that it really is a zero-sum world, and if someone else is better off it means you must be worse off.

So they think that any economic model means one party wins and the other loses. So you start describing a model where everyone wins and they just focus on what one party "loses" while ignoring what they win at the same time.

We're seeing this with music. More musicians are m

I think that Arrington's statement is incorrect. If it is, then Radiohead made millions of dollars on their album by relying on consumer stupidity. No one had to pay for the album, yet people did. Maybe it was because they felt a moral calling to give Radiohead some money for their work. I agree that music is advertising, but completely giving up on making money off the content (at least right now) doesn't make much sense because people still buy music. Looking for new revenue streams doesn't mean shutting off old ones. Musicians just need to be more consumer-friendly and they will become successful.

It seems to me Mike and Carr are talking about two

Let me play devil's advocate for a moment.

I realize Carr is an economic commentator, but it seems to me that he's talking about the emotional impact of the Art itself. The statement "Recorded music is nothing but marketing material to drive awareness of an artist" is sad because it means that all material automatically 'sells out'. The artistry, because reduced to the level of commericalism, is corrupted, if economics says that art is just an ad.

So, when it's all advertisements, there's no intrinsic meaning to the work; it's not an end in itself (art for the sake of art, poetry for the sake of poetry, making music for the sake of making music).

While in economics, the idea that you somehow have to avoid selling out seems to be counterproductive, by claiming someone wrote a song because he/she only wanted to make music; it gives that music the reputation of being uncorrupted and pure, and gives it a musical street cred. If all music is purely advertising (which I do agree with, btw), then that purity of making something without any economic incentivies just goes away.

---------
Again, Mike, I agree with you, but I can see where Carr is coming from: an emotional art perspective, not a pure economic one.

Re:

If it is, then Radiohead made millions of dollars on their album by relying on consumer stupidity.

It wasn't "stupidity," it was an economic choice. People chose to reward Radiohead. That's not stupid.

The problem is this belief that music HAS to be paid for. The economics simply don't support that.

I agree that music is advertising, but completely giving up on making money off the content (at least right now) doesn't make much sense because people still buy music.

I'm not saying necessarily give up on it. I'm saying don't rely on it, because it's unsustainable. And, actually, if you recognize how giving away that music for free can help build up other revenue streams at a much greater rate, then it very well may make sense to give up on the old model.

Re: It seems to me Mike and Carr are talking about

I realize Carr is an economic commentator, but it seems to me that he's talking about the emotional impact of the Art itself. The statement "Recorded music is nothing but marketing material to drive awareness of an artist" is sad because it means that all material automatically 'sells out'. The artistry, because reduced to the level of commericalism, is corrupted, if economics says that art is just an ad.

I guess I just don't see that at all. But, then again, I've been making the point that all content is advertising. I don't see that as "selling out." I see it as a fact of nature.

So, when it's all advertisements, there's no intrinsic meaning to the work; it's not an end in itself (art for the sake of art, poetry for the sake of poetry, making music for the sake of making music).

Not at all. The flip side of the equation (all advertising is content) comes into play here. If the content is soulless with no intrinsic meaning, it's not appealing. There's no interest in it and it's not effective as content or as advertising.

While in economics, the idea that you somehow have to avoid selling out seems to be counterproductive, by claiming someone wrote a song because he/she only wanted to make music; it gives that music the reputation of being uncorrupted and pure, and gives it a musical street cred. If all music is purely advertising (which I do agree with, btw), then that purity of making something without any economic incentivies just goes away.

If that's what he meant, that's not what he said. :) But, you have to understand that I really am not saying that all content is *commercial*. I'm saying it's all *advertising*. There's a difference...

Re: The problem with Mike's Theory

Mike's theory isn't a layman's theory but rather closer to something like a scientific theory.

Theories like the theory of evolution is a model that explain a part of how the world work. It is usually backed by horde of evidence and considered practically truth. So much that to dispute the Theory of Evolution will get you automatically labeled a crackpot.

So in that sense, Mike's Theory of Freeconomic provide a model on how people will succeed in the new brave world of infinite supply of something. He got ton of horde of empirical evidence and real world examples to back his theory up. His might not be as tested much as the Theory of Evolution or have not been exposed to the wider economic community. But so far, no detractors I see ever successfully disprove his theory.

However, his theory is still up for grab for changes and challenges.

Notes: This is a regurgitation of what I learn about science in high school.

Re: Re: The problem with Mike's Theory

What about anonymous creators?

If content's whole purpose is advertising for its creator, then if the creator decides to go anonymous, then there's no point to the content?

I could point to the value gained by both creator and reader in the anonymous comments on this blog, but there are better examples.

How about the pre-recorded "on hold" music you listen to on a phone call? Or the muzak in a lift? Sometimes the artist is recognisable, but traditionally it isn't. This recorded music could not be advertising for the artist.

How about when a recording of the national anthem is played at a sporting event? The performer gets no credit, as it is a generic piece of music. There is no intent to sell any more of it. However, presumably the artist was paid, and the spectators are enthralled. Value all around, but not a drop of promotion.

I totally agree that music can serve as an excellent promotional tool for the artist. However, I disagree that it is good for nothing else. This should be self-evident!

Re: What about anonymous creators?

If content's whole purpose is advertising for its creator, then if the creator decides to go anonymous, then there's no point to the content?

As I tried to clarify in the post, it's not just advertising for its creator.

How about the pre-recorded "on hold" music you listen to on a phone call? Or the muzak in a lift? Sometimes the artist is recognisable, but traditionally it isn't. This recorded music could not be advertising for the artist.

Sure it is. Just because it's not immediately recognizeable doesn't mean it doesn't advertise.

How about when a recording of the national anthem is played at a sporting event?

Advertising the country/patriotism/nationalism, etc... Also advertises for more use of that particular version of the anthem. Even if the performer is unknown, it doesn't mean they need to remain unknown.

It's all in the wrist, so to speak.

After Mike and I went a few rounds in the "Ads are content..." blog, I decided to keep my mouth shut for a bit and start looking around. I reviewed Techdirt as a whole, the television /music/movie industry, book industry, and just for the hell of it, various websites* around the net.

I wanted to find information I could use to say to Mike, "See! I was right and you were WRONG!" Sadly, I can not find this anywhere. Why? Because I walked in with the perception that all I see is an advertisement.

Even websites that have nothing to sell me usually advertise under the disguise of content, maybe relating to the Harry Potter world, or Isuzu Rodeos. It could have been random thoughts about things going on around the world.

In my original post, I said that an advertisement screams at people and this still stands. Sometimes that scream is a whisper. Sometimes its a bold statement.

This was absolutely important for me to understand because things are changing so fast, it's nearly impossible to keep up. My biggest concern is how advertising is "interfering" with content to such a degree, that true content is dwindling. But it's important to understand this because, as Mike points out, infinite goods can also be translated into infinite advertising.

The industry will ensure this. As I've said, nothing is free. Nothing. It costs SOMEONE, regardless if that cost is 0. For example: A website can't host free music without paying for the server the music sits on. So, to the user, the music IS free, but not for the music host, who has to find ways of driving consumers to its website, bombarded with ads, to pay so that THEIR cost is 0 (and passed on to the advertisers who make the ads, etc.)

In the long run, the "full circle" returns to the consumer who thinks their music is free, but actually paid for it via a bottle of Coke they purchased (the ad company increased its fees to Coke for the unrelated ad creation on the website of the free music, which forced Coke to raise its price to the consumer).

It's a dangerous road to go down to think at any given time that everything "digital" can be free. I'll never see free cable. I'll never see free cell phone service. I'll never see free music.

Nor will anyone. So while Mike continues down the road of trying to put all this together, I can see SOME benefits of doing so, but in the big picture I bring to these topics, I see more damage than good, especially when Mike confirms that the "captive audience" no longer exists (again, this is based on perception).

If the captive audience (web) no longer exists, how in the world is money to be made by these ad placements, thus, giving consumers free products?

Techdirt isn't free to Mike (et al) when it comes to giving us this free content. To make up the server costs, they sell products and host ads. This is a classic example of "infinite" goods at "zero" cost to consumers, but if you're a reader of Techdirt who decides to purchase a dossier or use Techdirt's services, I need to thank you for allowing me to read the blogs on this site. After all, you paid for it to be here.

But are those side bar ads really necessary? This is where I have my beef when looking at other "content" outside of the web.

Take television, for example. Are those 4 minute commercial interruptions really necessary? What do they REALLY pay for? I ask, because I don't see shows produced by the network, but real people who don't work for the network. I believe it's a producer's job to help obtain financing to get the show on the air.

Ads on radio? Given the amount of time that radio's been on the air, it is safe to assume the technology costs of "giving out frequency over the air" has dwindled enough to dismiss it as expensive. There is no technology change. The FM signal is the same today as it was when it started. Hell, I wouldn't be too surprised if 70s equipment is still being used in many radio stations.

Since the music is the content (and thus, ad), and I rush out to buy Britney's latest CD (as if), the radio stations don't get a dime of that CD purchase, so what's in it for them? And why is it consumers have to pay TWICE for that "free" content (don't forget about the full circle here!)?

The way I see it, and I'm sure Mike will disagree here, is that when companies see a way to increase profits, they'll take any step necessary to do so with disregard to the true consumer. We see this every day and eventually, the entire system will begin to fail.

Because I've fought against the whole "content are ads" since day one, but I was wrong to do so. It's the commercial interruption I as fighting against, and still do.

While the costs of "infinite goods" may be 0, delivering them is not and that's where we, as consumers, will continue to get screwed over time.

Because the next time you purchase that 20oz Coke, you need to ask yourself one basic question: What are you really paying for with that item?

There's no way in hell that the bottle + liquid costs $1.49 to produce but a 30 second ad during the SuperBowl costs $2 million. I can't imagine what it costs to broadcast 10 commercials per day on multiple channels.

I don't like where Mike's going with this whole zero cost + content = ad campaign. He even stated that banner ads no longer work (while I disagree). This is why Flash ads are now more popular. It's the whole "in your face" campaign that all business seem to think is good to do.

And what choice does a consumer have to rid themselves of this type of blatant commercial interruption? Go to another website? Sure, but given this tactic seems to work, it will eventually appear on that website too.

I wonder how long it will take Techdirt to begin throwing Flash ads at us? I'm sure never, because it doesn't NEED to where other sites, in order to stay up and running, feel they HAVE to.

Economic vs. Social value

The tempest over Arrington's words is not because they are a groundbreaking statement of economic theory, but because his statement reduces human expression to purely economic terms.

In the context of an economic discussion, this is perfectly appropriate. In the context of human expression, this is as inappropriate as assigning economic value to your children.

In this debate I fault both Arrington (for failing to nuance his statement) and Carr (for rhetorical absence - his post is nothing but a stammering "did he just say that?").

In general, this seems to be what many of these "debates" about the economics of internet music amount to. One writer cites a basic and widely-held principle of economic theory, then another writer expresses shock at the shallowness of a purely economic worldview. Duh.

There is also a persistent "artist as victim" myth that I have commented on before. Artistic talent is a gift, and people who have made sacrifices to create art and share it with others deserve respect. Same goes for intellect, athletic talent, etc. But simply having talent does not entitle one to a paycheck. Part of being a human being is figuring out what to do with your gifts, whether a professional outlet (a market) or other non-monetary ways to cultivate and share them with the world.

The other myth is that art has only recently become "polluted" with markets and money. A few years ago I toured Europe and had the privilege of seeing many great Renaissance paintings and sculptures, almost all of which were commissioned by patrons of the arts, who in that time were royals or wealthy landowners.

With the democratization of content made possible by the Internet, maybe we're in the middle of a different kind of renaissance right now: a societal realization of truth and beauty through humanity. If scientific thought and artistic expression can once again be united, then tired arguments of entitlement for artists or anyone else will fade into irrelevancy.

Re:

I agree that it is sad to ignore the artistic value of content. Indeed, if the content lacked artistic value it wouldn't be very good content. But once you start trying to make money from it you need to consider it from an economic point of view. As this started with Billy Bragg trying to make money from his music it is fair to say that his "Recorded music is nothing but marketing material to drive awareness of " Billy Bragg.

Re:

why would you expect things to be free?
If you've read my post, you'll see that I didn't say this. I said it costs consumers eventually. Read the description about buying a Coke.

Why would you think that consumers will always be screwed concerning digital goods?
Simple. If the price of digital goods reaches 0, then consumers will be screwed in trying to make up revenue for the company offering the "free" (0 cost) item, usually by means such as ads or increased prices on other goods.

Simple example: Trent Reznor offered many songs "free" to the public, but his OLDER stuff still costs .99. Do you really think it costs .99 to make a single mp3? Of course not. Hence the "screwing" of consumers.
(Sorry, Trent. Just using you as a quick example. Nothing against your practices.)
Note: I've also noticed a trend that mp3 prices seem to be increasing to $1.49 on some sites. Bend over, Mr. Consumer.

Where did you get this notion that things are free? Nothing is free, there is always a price. Thats just the way things work.
As stated, I agree with this. Review the "Full circle" aspect of "free" above. :)

Arrington's statement is correct, and stupid. Correct in his assessment of the direction recorded music is headed, the pay first paradigm is over. Fans want to know they like an artist before they buy, it's not a debatable point any longer, it just is the way it is. As much as I do appreciate his perspective, it is tired and recycled and not adding any value to the conversation. It means nothing to the people who are affected most by this change - the artist. All of this discussion does nothing to support or encourage the artist or help them navigate their options as their income sources shift. I find it fascinating that so much debate occurs on tech blogs among marketers and other "suits." Most of them have never been on a crowded tour bus, spent hours stuffing and sealing envelopes for the press or played to a room of three people. It's easy to make a comments from the ivory tower. I suggest all of you come down off the hilltop and spend a few days in the life of an industry you claim to know so much about - and then contribute something useful to the conversation.

Re: Re:

"Note: I've also noticed a trend that mp3 prices seem to be increasing to $1.49 on some sites. Bend over, Mr. Consumer. "

Nobody is being bent over. There is no monopoly on music, and you don't have to buy it. This isn't like the cost of water or bread going up. If you do not find the price acceptable, you always have the option of voting with your wallet - do not buy it.

Re:

That's called status quo, aka mammoth thinking: "Because our fathers and grandfathers and grandgrandfathers did so and it worked! [and we're too lazy to invent something new]". That kind of thinking didn't help the mammoth though.

Re: Re: Re: Re:

Do not buy it? I'm sorry, but isn't this the whole principal of goods being sold?

A marketplace is about choice. If you don't like the price you don't have to buy it.

Point is, if people ARE buying the song at $1.49, then it's obvious OTHERS will follow in this trend to such a point that ALL songs are $1.49.

That statement makes no sense. I could just as easily point out to you that more musicians are giving their songs away for free, so according to you it's obvious that OTHERS will follow this trend tot he point that ALL songs are free.

Re: It's all in the wrist, so to speak.

Twinrova, I'm afraid you still don't get what I'm trying to say.

Even websites that have nothing to sell me usually advertise under the disguise of content, maybe relating to the Harry Potter world, or Isuzu Rodeos. It could have been random thoughts about things going on around the world.

There's no "disguise." You have to stop thinking of advertising and content as two separate things. When you think that way I can understand why you think there's a disguise. I'm NOT talking about a disguise. I'm NOT talking about tricking people. I'm talking about being totally 100% upfront with people.

The content on Techdirt is "advertising" the wisdom of Techdirt. Is that disguised somehow?

This was absolutely important for me to understand because things are changing so fast, it's nearly impossible to keep up. My biggest concern is how advertising is "interfering" with content to such a degree, that true content is dwindling. But it's important to understand this because, as Mike points out, infinite goods can also be translated into infinite advertising.

Again, you still are thinking of them as separate things. Advertising doesn't "interfere" with content. It is content.

And you keep saying "true content" but that also assumes that content that is advertising isn't true content.

Do you think Techdirt posts are any less "true."

Do you think that Billy Bragg's songs are any less "true" because he wants you to buy his CD or see him in concert?

Re: Re: Re: Re:

Thus, while I'm paying artists for their music, I'll either have to limit my purchases or not buy it. Either way screws me over.

I don't understand. Somebody offering something for sale at a price you don't like screws you over? I'll sell you this nice 20" monitor for $1000. Seriously, I will. Did I just screw you over?

If songs are selling for $1.49, then that means that's the market price. I don't know why you think you have a right to decide what the market price is. You either pay the market price, or you don't. You don't expect to be able to set the price wherever you want it for other goods do you? Why is music any different?